Welcome to The Retirement Wealth Podcast. Our goal is to help those retired or soon to be retired investors make more informed financial decisions and live an enjoyable retirement. Our host, Mike Lester, is the founder and CEO of Talon Wealth Management. Mike is an investment advisor representative of Retirement Wealth Advisors, Inc. An SEC registered investment advisor. Thanks for joining us today. And let’s get started.
Whether it’s news about Afghanistan, the pandemic, tax proposals, there’s so much news to be distracted by. I did a small survey of a few friends that are over age 50, and I asked them if any of these major topics are impacting their overall financial plans.
Speaker 3 (00:48):
At the moment, more than any of the headlines or taxes or that kind of thing, I’ve found colleagues are taking advantage of the hungry marketplace to find new jobs. So now the overwhelming aspect is trying to cover my own job as well as other people’s jobs.
Speaker 4 (01:02):
I lived in a conflict zone in the Middle East for four years. When you live in a conflict zone, you realize the world goes on and investments ebb and flow. And we take a longterm investment strategy anyway. And so I guess what’s going on in Afghanistan doesn’t make me think any differently about my investment. Now, COVID does.
Speaker 5 (01:21):
All of this concerns me. But also, I’ve been told for years, you leave the money in your mutual funds, your investments, that kind of thing, and keep plugging along. Same as I’ve been doing. There’s going to be a correction at some point.
These are friends across the country. What are the concerns that people are sharing with you here though, Mike?
Mike Lester (01:41):
One of the big, big concerns right now is just bubbles, right? So we can see that around us. Housing, homes, real estate, cost more than it should. That’s a bubble. People know it. Now, some people are taking advantage of it. They could sell right now for a lot more than probably they even think their home is worth, but they happen to be able to get it. The problem is where are you going to go? So if you’re near retirement, you might consider selling your home and going to a place where things are less expensive, and maybe you’re making money on that deal. But if you’re not willing to move to another state to save, that’s potentially a problem.
But bubbles are an issue whether it’s real estate, whether it’s the stock market. And we’re looking at things and we’re addressing that when it comes to investing. We have to pay real close attention to the stock market. Because if real estate’s in a bubble, if the stock market’s in a bubble, the question becomes, when does that bubble burst? And so that’s a big concern for individuals. It’s great that markets are at or near all time highs. I mean that’s fantastic. And people are looking at their 401ks and their retirement accounts, their investment accounts, our clients are looking at their portfolios going, hey, Mike, this has been a great run up to this point, but what are you doing to protect our money when the bubble bursts?
And so I’ll have that conversation with existing clients. And then I’ll have conversations with people who aren’t working with us about their portfolio and what they can do to protect themselves when the bubble bursts. So that’s a part of it. Another thing is just lack of confidence. One of your friends, I guess on the audio piece there mentioned that she was in a conflict zone.
By the way, I didn’t know that about her until I said, I do this radio show with Mike, how do these things affect your decision making?
Mike Lester (03:15):
Yeah. It’s interesting thing to find out about somebody that you didn’t know. But then also, I respect what she said about, well, typically, what’s going on in that part of the world historically, hasn’t had a huge impact unless it had to do with oil and stuff like that. But a huge impact on the stock market and the United States. And I’d say that’s true historically, but what we’re also seeing with our clients, and I think just nationally, is this lack confidence, right? So if the party in charge is messing up that scenario as badly as they’re messing it up, what about the financial policies that they’re going to have moving forward? What about the tax policy moving forward? What about all these other things?
And so there’s this lack of confidence that is making people nervous when it comes to markets, and people just know what they should do. Like I said, already, we’re sitting at near our all time highs. I like that about my portfolio, but I’m worried moving forward and I’m not confident in markets moving forward and I just need to know what to do. And so for our clients, it’s pretty easy. They know we’re actively managing their portfolios. One of the other listeners basically had a hang in approach, like, well, I don’t know. I just invest and forget. Our clients are retired or close to it. They don’t want to do that. They need to know they have a plan.
And the question becomes, when do you want to be committed to being in the stock market? And when is enough enough? And you just have to say, you know what? The reward is not worth the risk at this point. So I’m just going to back out. And there’s some timing to that. And you can’t time the stock market, nobody has a crystal ball, but we can be smart about investing. And Kristen, that’s probably my favorite conversation to have with individuals that have never sat down with us before. What active management of a portfolio looks like. What working with a fiduciary looks like. If you’re working with somebody that has a vested interest in you doing well .. and by the way, legally has to put your needs ahead of their own. What that looks like.
And so for us, it’s a conversation. It’s a sit-down at the office. We take a look at where you are right now. We take a look at what your goals are, as far as retirement dates or staying retired. And we take a look at how much income you’re going to need. We take a look at your portfolio. We put all of that together and basically wrap it up and put a bow on it and say, hey, here’s your complete financial plan. It’s shows you what you need to do to be successful in retirement. Not everybody knows that, Kristen. They’ve just been working hard, putting money away for retirement. But making that transition, a lot of the time, it’s hard to do. All we’re really doing is providing that information.
You might as well get a second opinion. Visit guardingyournestag.com. Well, we’ve all heard of the great depression, the great recession, but according to CNBC, we’re currently experiencing the great resignation.
Speaker 7 (05:48):
People are quitting their jobs and droves in what’s been dubbed the great resignation, pushing job vacancies to all time highs. And a new survey from productivity from Lattice found that 54% of respondents are looking to change jobs. And 43% say their career paths have stalled or quote, “Slowed to a crawl.”
And you think about some of the audio we played from some folks I know earlier, he’s frustrated with his job because other people are moving on to other jobs. And he’s-
Mike Lester (06:13):
Now he’s doing everybody else’s job with it, yeah.
Exactly. So this all makes sense to me. But if someone’s considering leaving their job to look for a new one, or possibly to retire in the next year because they’re just over it or they’re just ready, what are some basic suggestions that they can start doing now to make that process as stress-free as possible?
Mike Lester (06:33):
Well, it’s boring and common sense, Kristen. But the first thing that comes to mind is what we’ve always heard is, set realistic expectations. And that’s a conversation that we’re having week after week with listeners. Because you went to work, you did your job, you got paid, you had health insurance, you had all these things. And then you’re looking to make that transition into retirement, and all of that just stops. And people are wondering, well, I know what my expectations are. I just don’t know if they’re realistic or not. And so that conversation is a big part of our financial planning process. As we go through portfolios, as we go through expenses, as we go through taxes, as we go through inflation. Defining what’s realistic and what isn’t, a lot of times I find is most people aren’t going to understand that or know that because they haven’t had to deal with it before.
It’s a really big shift going from putting money into a retirement plan, and just understanding that well, when I go to work, this is how much I see in my bank account every single month when they make the deposit. They withhold taxes from it for a lot of people. So I can spend what shows up there, taxes have already been withheld. The contribution to my retirement account’s been withheld because I asked them to do that. They matched it. That’s great. Goes into this, we refer to … passive retirement plan, 401k. I made the investment options in there.
And now suddenly I’ve retired, and I’ve got this amount of money set aside for retirement. Again, no health insurance, no paycheck, and no more contributions. So now instead of putting money in, I’m pulling money out of that account. Kristen, that’s … I mean, I deal with it every day. But people who are listening, people who are close to retirement or people who are just now transitioning to retirement, they know and I know from experience, that’s nerve wracking. That’s a huge shift. Pulling money out of an account and wondering, how long will it last? And how do I invest this money so that it doesn’t run out?
And unfortunately, it’s not as simple as being able to go to the bank and just get 8% on your money. I mean, we could all do the math on that. If I had a million dollars and I retired and the bank was going to give me 8%, I’d have $80,000. Subtract the tax … we could do the math. But it doesn’t work that way. And it’s not likely to work that way anytime soon. So what am I going to do with my nest egg to make sure it’s not just sitting there earning nothing, but that it’s growing for me so I can take income? But also, so that I’m not taking more risk than I’m willing to take?
Because I can’t just retire and then turn around and lose 20, 30, 40% and then have to go back to work. I mean, it’s unrealistic to expect markets are going to keep doing what they’re doing. So how do I navigate that? Kristen, if you go back, I mean, people ask me sometimes, so Mike, if markets crash, how much do you think it’s going to go down? I don’t have a crystal ball. I don’t know for sure.
Man, I wish you did. Can we just address that? I’m mad that you don’t.
Mike Lester (09:21):
Well, here’s what I do know, is it wasn’t that long ago … just about five years ago. October 2016 the stock market was around 18,000, right? It’s about 17,000 under 35,000, which is roughly where we are now. That’s almost a 50% drop. So do you think we could get back to 18,000? I mean, it wasn’t that long ago. And I don’t know that we could, Kristen, but I do feel like it could get pretty nasty. Not for people in their 20s or 30s or 40s who don’t care. They’re getting paycheck. I mean, it doesn’t really matter and it’s not going to change their lifestyle. But it is going to affect people that are retired or very close to it. You need to make sure you have a plan. You need to work with someone that you’re confident in.
It’s also important that you work with a fiduciary when doing this planning. I know that Mike and the other advisors on the team at Talon Wealth Management, they are fiduciaries. I want to wrap up today’s show, Mike, with a list from Martha Stewart, who makes me feel completely inadequate in life. However-
Mike Lester (10:23):
It’s a prison list?
No, that’s what I was going to say. I feel like I’m doing better than her in a couple ways, let’s be honest. But not around the house. But this was in her magazine this week. Things you forget to clean or replace around your house. They mentioned the air conditioning filter, carpets, dryer vents, the oven. I can’t tell you the last time I cleaned my oven. I need to get on that. Smoke detector batteries, toilet brush and cup. Just throw that thing out and get a new one, right? The fridge filters, the coffee maker, curtains, microwave, all these types of things.
Mike Lester (10:54):
I did air filters last weekend. And in my house, every single air filter’s a different size.
Oh, that’s the worst.
Mike Lester (11:00):
It’s such a pain in the neck. It’s the worst. Yeah.
But it’s a good list to have about some things to clean that we might be accidentally neglecting. What are some of the things that our listeners might be neglecting when it comes to cleaning up their financial house, if you will?
Mike Lester (11:16):
Well, real quick, Kristen, first of all, fees, right? So fees are really, really important. And they erode returns. It’s pretty common when we meet with individuals that, for the first time they’ve been listening to the program, a lot of times we’ll find out that they’re paying a lot more in fees than they need to be. And again, I’m not against fees, I’m just against fees without, what am I getting in return? So get what you’re paying for.
Another thing would be just your portfolio, rebalancing portfolios. I know that’s a technical term, but basically what it means is the stock market’s been doing very, very well here, obviously in the past 10, 11 years. Sometimes if you took a closer look at your portfolio, you would find that you think you’re a moderate investor, but because the market’s been doing well, you might actually be a lot more aggressive than you know you are. So understand your portfolio, know where you are. Look at rebalancing that portfolio. I mean, every good day in the market is a day closer to the next crash, right? [crosstalk 00:12:09]
I have never thought of it that way. That’s true.
Mike Lester (12:12):
Listen, it’s going to happen at some point, right? So we just want to make sure we’re prepared. It’s being prepared. The six Ps, Kristen, proper pre-planning prevents poor performance. You can add that to portfolios or pretty much anything. But pre-planning is important. So understand your portfolio, make sure you’re keeping a look at that. Old 401ks, we talk about this all the time. Make sure those orphaned 401ks, a 401k from an old … you’ve forgotten about it. It’s just sitting out there. It’s real money. It’s working for you. If it was invested aggressively, it’s probably done pretty well, but don’t just leave it back there. You’ve got options on old 401ks.
And Kristen, I’ll just end the show with this. We talk about it all the time. Age 59 and a half. I talked about a client earlier in the program who’s sitting there, he’s 60. Now we’re able to help him … he’s over 59 and a half. With his 401k. Whether it’s a 401k, 403B retirement accounts, don’t overlook active management. You’re probably not getting it through your employer. And if you’re over 59 and a half, it’s probably accessible to you. So take a look at it.
If you would like to have a comprehensive financial plan and an analysis of your current portfolio, go ahead and visit our website at retirement.tips/plan. And we can do that for you complimentary.
Thanks so much for joining us on today’s show. Be sure to subscribe to our podcast. Visit our website at retirement.tips for more free retirement planning and investment resources. Thanks for tuning in to today’s show, and we’ll see you next time on the Retirement Wealth Podcast.
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